In Japan where there are a good many silver mines the ratio of gold to silver is today 1 to 8: in China 1 to 10: in the other countries of the Indies on this side 1 to 11, 1 to 12, 1 to 13, and 1 to 14 as we get nearer to the West and to Europe. But if the mines of Brazil continue to supply so much gold the ratio may probably fall eventually to 1 to 10 even in Europe which seems to me the most natural if anything but chance is the guide to the ratio. It is quite certain that when all the gold and silver mines in Europe, Asia and Africa were the most exploited for the Roman republic the ratio of 1 to 10 was the most constant. If all the gold mines regularly produced a tenth part of what the silver mines produce, it could not be determined that for that reason the ratio between these two metals would be as 1 to 10. The ratio would always depend on the demand and on the market price.
Possibly rich people might prefer to carry gold money in their pockets rather than silver and might develope a taste for gildings and gold ornaments rather than silver, thus increasing the market price of gold.
Neither could the ratio between these metals be arrived at by considering the quantity of them found in a state. Suppose the ratio 1 to 10 in England and that the quantity of gold and silver in circulation there were 20 million ounces of silver and 2 million ounces of gold, that would be equal to 40 million ounces of silver, and suppose that 1 million ounces of gold be exported from England out of the 2 millions, and 10 million ounces of silver brought in in exchange, there would then be 30 million ounces in of silver and only 1 million ounces of gold, still equivalent in all to 40 million ounces of silver. If the quantity of ounces be considered there are 30 millions of silver and 1 million of gold, and therefore if the quantity of the two metals decided the ratio it would be as 1 to 30, but that is impossible.
The ratio in the neighbouring countries is 1 to 10, and it would therefore cost only 10 million ounces of silver with a trifle for the cost of carriage to bring back to the state 1 million ounces of gold in exchange for 10 million ounces of silver.
To judge then of the ratio between gold and silver the market price is alone decisive: the number of those who need one metal in exchange for the other, and of those who are willing to make such an exchange, determines the ratio. It often depends on the humour of men: the bargaining is done roughly and not geometrically. Still I do not think that one can imagine any rule but this to arrive at it. At least we know that in practice it is the one which decides, as in the price and value of everything else. Foreign markets affect the price of gold and silver more than they do the price of any other goods or merchandise because nothing is transported with greater ease and less injury. If there were a free and regular trade between England and Japan, if a number of ships were regularly employed in this trade and the balance of trade were in all respects equal, i.e. if as much merchandise were always sent from England to Japan, having regard to price and value, as was imported from Japan, it would end in drawing at last all the gold from Japan in exchange for silver, and the ratio between gold and silver in Japan would be made the same as it is in England, subject only to the risks of navigation; for in our hypothesis the costs of the voyage would be supported by the trade in merchandise.
Taking the ratio at 1 to 15 in England and 1 to 8 in Japan there would be more than 87 per cent to gain by carrying silver from England to Japan and bringing back gold. But this difference is not enough in the ordinary course to pay the costs of so long and difficult a voyage.
It pays better to bring back merchandise from Japan rather than gold in exchange for silver. It is only the costs and risks of the transport of gold and silver which can leave a difference in the ratio between these metals in different states: in the nearest state the ratio will differ very little, there will be a difference from one state to another of 1, 2 or 3 per cent and from England to Japan the total of all these differences of ratio will amount to more than 87 per cent.
